I have always looked upon my experiences here in Ecuador as nothing short of an adventure.....a "re-conquest". You will find that this Blog not only offers information on how to live, invest or simply visit Ecuador (rated the number one retirement heaven by International Living magazine for 2011) but also informative information and articles on how to survive in this fast changing and volatile World we live in. Your comments are welcome!
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El Conquistqdor Francisco de Orellana

The Conquistador who put the Amazaon baisn "on the map"....Francisco Orellana

Saturday, January 4, 2014

Money laundering or new regional currency in South America.....this has the US worried

Who Needs Bitcoin? Venezuela Has Its 'Sucre'

By Mercedes Alvaro January 2, 2014 6:5

QUITO, Ecuador—Satoshi Nakamoto and Hugo Chávez had at
least one thing in common: Both created virtual currencies whose
popularity is growing but which are also raising alarms among
law-enforcement officials.

Where the pseudonymous Mr. Nakamoto is credited
with creating bitcoin, the late Venezuelan president created the sucre, a
virtual currency designed to dethrone the dollar as the main trading
currency used with his country's regional trading partners: Ecuador,
Cuba, Bolivia and Nicaragua.

The sucre was
introduced at Mr. Chávez's urging in 2010, taking its name from the
Spanish acronym for the Unified System of Regional Compensation. Sucre
is also the last name of 19th-century Venezuelan independence leader
Antonio José de Sucre y Alcalá. In subsequent years, Mr. Chávez
frequently promoted its use.

There are differences between the
virtual currencies. The sucre is managed by a board of central-bank
representatives, which has helped bolster its use. Bitcoin, by contrast,
has no government backing.
In addition, bitcoin can be directly
used by its holders. The sucre is a trading currency. Importers and
exporters make and receive their payments in their local currencies.

Another
difference is that Venezuela has promoted the sucre with the idea it
may eventually evolve into a hard, regional currency, along the lines of
the euro. Until now, almost all the trading using the sucre has been
between Venezuela and Ecuador.

Ecuadorean companies exported $737
million worth of goods to Venezuela using the sucre system in the first
nine months of 2013, an 80% increase from the same period in 2012,
according to Ecuador's central bank.
That growth has drawn
attention from the country's regulators, which are cracking down as
fraud involving the virtual currency rises.

Ecuadorean
prosecutors have filed money-laundering charges against 19 people, nine
of whom have been arrested while the others are still on the run from
authorities.

"It's a very big operation, and we're working in
coordination with the prosecutors' office in Venezuela," said Galo
Chiriboga, Ecuador's top prosecutor. "We've detected criminal
organizations that operated in Ecuador, sending money not just to
Venezuela but also to other countries."

Mr. Chiriboga declined to provide more details because the investigation is continuing.
Officials from the Venezuelan Embassy in Quito declined to comment on the sucre or the money-laundering investigations.

The
heightened scrutiny of the sucre comes as law-enforcement officials and
policy makers around the world are paying more attention to the risks
posed by proliferation of virtual currencies. China, for example,
recently moved to restrict its banks from using bitcoin amid concerns
about money laundering. European regulators have warned of the risks of
using bitcoin.

In the U.S., the Federal Bureau of Investigation
in October announced the seizure of 144,336 bitcoins from the computer
of the alleged owner and operator of Silk Road, a website the FBI says
was set up to trade in illegal goods, including drugs. The website has
been shut down and several individuals have been arrested and charged in
connection with it, including the alleged owner, Ross William Ulbricht,
who has denied the charges.

For companies in Ecuador, the
sucre's appeal is its implicit payment guarantee. A combination of
falling oil revenue and currency controls have resulted in a dollar
shortage in Venezuela that has left many importers of basic goods
hamstrung. Ecuador exports to Venezuela everything from carts to tuna to
diapers.

In a typical sucre transaction, a company in Ecuador
sends the Venezuelan importer an invoice denominated in U.S. dollars,
which is Ecuador's national currency. The Venezuelan company then sends
that invoice to the Venezuelan central bank, handing over bolívares. The
Venezuelan central bank converts the bolívares to sucre and transfers
the sucre to Ecuador's central bank. There, it is converted into U.S.
dollars, Ecuador's national currency, and the exporting company receives
its payments.

NeoHyundai SA, a distributor of Hyundai Motor Co.
vehicles based in Ecuador, exports trucks to Venezuela using sucre. The
biggest advantage is the ability "to secure payment without relying on
the availability of foreign exchange in Venezuela," said Jose Avila, a
marketing manager at NeoHyundai.
In Venezuela, the sucre is also a way to expedite deliveries from outside the country.
Emilia Gómez, an employee at Pavco de Venezuela SA, a company that
manufactures and sells pipes and fittings, said it can take as few as 15
days to receive approval for payments when using sucre. Without it,
approvals take almost a year.

"The advantage is that is makes the process of importing and paying easier," she said.

But
prosecutors in Ecuador say they have uncovered instances when "ghost
companies," often set up as joint ventures between Ecuadorean and
Venezuelan firms, have sent invoices to Venezuela with inflated prices
for goods.

One company in
Ecuador exported calcium carbonate, which has many industrial uses, at a
price of $1,000 a kilogram, when the actual cost of the shipment was 17
cents a kilogram, according to prosecutors. Another company exported
handicraft equipment at a stated value of $250,000, whereas the actual
cost was between $600 and $1,200.

Experts
say some companies exploit the wide disparity between official and
black-market exchange rates in Venezuela to make sucre more attractive.
Officially, $1 buys 6.3 bolívares in Venezuela. But $1 is worth about 10
times that on the black market, according to several websites that give
the unofficial rate.

Venezuela's
currency controls "unfortunately have created incentives for hidden
transactions and a black market" in sucre, said Daniel Legarda, vice
president of the Ecuadorian Federation of Exporters.

Write to Mercedes Alvaro at mercedes.alvaro@wsj.com and Jeffrey T. Lewis at jeffrey.lewis@wsj.com

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About Me

I have lived in Ecuador since 2001 and have been offering our services to foriegners wanting to not only visit Ecuador...but purchase property for a new life. My Ecuadorian wife and I are busy with three wonderfull children but are also busy with our coffee shop, farm, and statue export business. Furthermore, we have been offering Traditional Roman Catholic Pilgrimages to Ecuador for the past 7 years. There are many historical and artistic aspects of Ecuador that are impressive. But for me...it is the humility of the Ecuadorian people, which is most alluring. We invite you to come to Ecuador and experience the old world culture, faith, and beauty of this very special land !

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